Taxation of Prostitution: Even the World’s Oldest Profession Has Tax Implications

In its recent judgment of 6 October 2025, Ref. No. 22 Afs 24/2025-48, the SAC reached a relatively clear conclusion: income from voluntary prostitution is subject to personal income tax. In doing so, the SAC overturned an earlier judgment of the Regional Court in Ostrava – Olomouc branch, which had concluded that such income could not be taxed.

The Story Behind the Dispute

The case itself began rather simply. The tax authorities discovered that an individual had been regularly exchanging significant amounts of euros and depositing the proceeds into a bank account without reporting the corresponding income in her tax returns. The taxpayer later explained that she had worked as a professional companion. During the proceedings, however, the courts treated the income as income from prostitution. The Regional Court initially accepted the argument that by taxing such activity, the state would effectively be granting prostitution the status of a legitimate economic activity.

The SAC rejected this conclusion and reiterated a fundamental principle of Czech income tax law: in general, all income is taxable unless expressly exempted or excluded by law. Income from prostitution is not listed among such exceptions.

Tax Law Is Not a Moral Tribunal

One of the most interesting aspects of the judgment is the court’s strict separation of moral considerations from tax considerations. The SAC expressly stated that its role was not to assess the social acceptability of prostitution, but merely to determine whether taxable income had arisen. In other words, the tax authorities are not tasked with judging morality, but with assessing income and expenses.

A key factor was that voluntary prostitution itself is not a criminal offence under Czech law. The Criminal Code penalises only related conduct, such as pimping, human trafficking or sexual coercion. The SAC therefore rejected the argument that by taxing prostitution the state was somehow profiting from such activity or even acting as a pimp. According to the court, the collection of tax does not constitute support for or approval of the activity in question, but merely the ordinary exercise of public authority.

The New York Convention Does Not Prevent Taxation

Another important issue in the dispute was the interpretation of the New York Convention on the Suppression of Traffic in Persons and the Exploitation of the Prostitution of Others. The Regional Court initially interpreted the Convention as preventing the state from taxing prostitution without implicitly accepting it.

The SAC, however, rejected this interpretation. According to the court, the Convention primarily targets exploitation and forced prostitution, not the voluntary provision of sexual services as such. Consequently, the Czech Republic’s international obligations do not prevent income from prostitution from being taxed.

What Does the Judgment Mean in Practice?

The SAC’s decision sends a relatively clear message: if a particular activity is not criminal and generates real income, it cannot be excluded from the tax system merely because it is socially controversial. Income from voluntary prostitution must therefore be included in tax returns, and failure to report it may lead to additional tax assessments and penalties.

More broadly, the judgment confirms that tax law operates in a largely pragmatic and value-neutral manner. Once income arises, a tax obligation will generally arise as well — regardless of whether the underlying activity is socially admired or, on the contrary, highly controversial.

Authors:

Gabriela Ivanco, Tax Department Manager

Anna Klímová, Newsletter Editor